Indiana's Insurance Industry

Indiana is home to 179 insurance companies, with another
1,660 licensed to do business in the state in 2004. Back in 2001 (the
latest year available), the insurance industry contributed nearly $3.8
billion to Indiana’s gross state product.

Insurance premium tax receipts totaled more than $178 million
in 2002, while Indiana insurance carriers paid Hoosiers an estimated $2.61
billion in direct income and $1.35 billion in indirect or induced income.

Employment and Wages

Looking at the 25 largest Indiana industry sectors (as defined by three-digit
NAICS codes) reveals that Indiana’s insurance industry is the highest-paying
nonmanufacturing sector and the third best-paying sector overall, according
to Covered Employment and Wage (CEW) data.

In 2003, the average weekly wage for insurance workers in
Indiana was $917, ranking it 15th among all reporting sectors and well
above the Indiana average of $642.

The insurance sector is made up of a variety of subsectors
that fall into two main categories: insurance carriers (such as life,
health or casualty insurance) and insurance agencies, brokerages and related
services. Here are a few facts gleaned from the Current Employment Statistics
(CES) survey:

In 2003, the Indiana insurance industry employed 46,000 people, ranking
it 14th out of the 35 three-digit industry sectors surveyed.

This employment size is slightly larger than the sectors for motor
vehicle and parts dealers (42,300) and machinery manufacturing (43,800),
while slightly smaller than the truck transportation (47,100) and primary
metal manufacturing (52,300) sectors.

Since 1990, Indiana insurance employment grew 6 percent, compared
to 12 percent for the United States (see Figure 1).

Growth in Indiana’s insurance industry employment lagged
behind the country through 1994, but then strengthened through 1997
(see Table 1). Between 1998 and 2003, the United States grew 2.6 percent,
while Indiana declined 5.2 percent.

Monthly job data for 2004 show growth for both Indiana and the nation,
with Indiana slightly leading.

Employment: Although exact rankings are not available,
this information is based on InfoUSA company listings for employers with 2,000
or more workers in Indiana.

Indiana’s largest insurance companies by employment are Anthem
Health Systems, Conseco Services, Lincoln National Life Insurance and American
United Life Insurance. Also included are Safeco Insurance Company of America,
Golden Rule Insurance, Liberty Mutual Insurance, State Farm Mutual Auto
Insurance and State Automobile Mutual.

AON Service Corp., Key Benefit Administrators and the Forethought Group
are the state’s largest insurance agencies and brokerage offices.

Adminastar Federal is the largest third-party administrator of insurance
funds.

Assets: Indiana has 25 insurance companies with over $200
million in assets, ranging from Lincoln National Life Insurance with assets
of $67.8 billion to Mennonite Mutual Aid Association at $259 million.

Indiana’s top nine life/health insurance companies with assets
of $1 billion or greater are Lincoln National Life Insurance, American United
Life Insurance, Anthem Health Systems, Conseco Annuity Assurance, Conseco
Insurance, Safeco Insurance Company of America, Golden Rule Insurance, Liberty
Mutual Insurance Company and State Farm Mutual Auto Insurance.

Indiana’s top five property/casualty insurance companies with
assets of $1 billion or greater are Safeco Insurance Company of America,
Golden Rule Insurance, Liberty Mutual Insurance, State Farm Mutual Auto
Insurance and State Automobile Mutual.

Revenue: While insurance companies are not among the leaders
when considering the largest firms by employment size, they are among the
state’s largest companies when compared by revenue size.

The largest Indiana-based public companies by revenue include Anthem
Health Systems (1), Conseco Services (5) and Baldwin and Lyons (46).

Among the largest Indiana-based private companies by revenue are American
United Life Insurance (1) and Farm Bureau Insurance (6).

Concentration, Taxes and Competition

The insurance industry is often mentioned as a possible industry to attract.
Its employment levels show long-term growth, and although it is not immune
to recessionary conditions, the effects are less severe. The problem is that
the insurance industry, like many service sector industries, is closely linked
to population and little influenced by geographic conditions. Of course, some
exceptions exist. States showing industry concentration with respect to population
include Connecticut, Nebraska, Iowa, New Hampshire, Minnesota and North Dakota.

One common trait for these states is their low tax rates for the insurance
industry. In some cases, they show employment growth (Iowa and Nebraska).
Connecticut, however, shows a sharp employment decline, especially from 1992
to 1996. Connecticut’s historic rates are not readily available, but
it appears the state has lowered its tax rates and its employment has been
relatively stable since 1997 and is slowly increasing.

Overall, tax rates appear to be continuing to decline. Indiana is lowering
its premium rate and Iowa’s 1 percent rate is being phased-in between
now and 2006. The competitive nature of lower premium taxes to attract new
businesses and employees is most clearly seen in Colorado. Here, a new 1 percent
rate is only for insurance companies with headquarters or regional home offices
in the state.

While tax premiums are a fair indicator of employment growth trends, they
vary over time. The insurance industry is also a service sector that is strongly
influenced by changes in population. This is especially true for the agents
and insurance brokers component of the industry.

Another fact for consideration is that many of the states with the fastest
growth also have the lowest wages. This suggests that a large segment
of insurance sector job growth is lower-paying, back-office functions
and not high-wage headquarter operations. Even low annual average wages,
however, still run $40,000 and up.

What is Indiana Doing to Be Competitive?

In 1998, the Insurance Industry Working Group was created to identify ways
to improve the operating environment for Hoosier insurance companies.

As a result of work done by this panel and other industry supporters, several
key pieces of legislation have been passed in recent years:

Indiana State University (ISU) students can earn an undergraduate degree
in insurance and risk management. In 1999, the Gongaware Center at the School
of Business was opened to support this degree program, to educate the insurance
executives of tomorrow and to recruit top high school students. ISU also
offers a distance education degree program in insurance.

Ball State University offers degrees in actuarial science, as well as
insurance. Both majors fall under the umbrella of the Center for Actuarial
Science, Insurance and Risk Management, which encourages its faculty to
conduct applied research to benefit the insurance industry and the people
and businesses dependent upon it.

Ivy Tech State College has 23 campuses across the state and offers an
insurance specialty associate degree that prepares students to perform customer
service functions. Graduates of the program are eligible for employment
in custumer support positions, rating positions, claims handling positions
and others.

Notes

The information used in this section comes from both public (employment)
and private sources (assets and revenues). This gives a broader perspective
in understanding relative strengths of insurance sector companies, but there
are some inconsistencies and gaps in the information. Employment information
is for all companies, but confidentiality restrictions prevent exact rankings.
Information in both the asset and revenue sections comes from the Indianapolis
Business Journal 2004 Book of Lists. Asset information is for insurance
companies only. Revenue data is for all Indiana-based companies. Data for
Golden Rule is not listed for assets or revenue.